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Applicability of Sec. 271(d)(a) & 267(s)(t) for cash payment

10 April 2019

One of my clients has received goods from suppliers in the month of Feb on various dates for which he paid cash on daily basis. Total purchase during the month was at a cost of around Rs. 4.50 lakh (The vendor raised a single bill on last day of month) out of which he paid Rs. 1.90 lakh in cash and balance by cheque/DD. Whether sec. 271 DA or 267 ST applies in this case?

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7 Replies

rama krishnan (12244 Points)
Replied 10 April 2019

no... it'll not but however 40A(3) will apply if the payments exceeds 10000

1 Like

Rahul Vinchu (39 Points)
Replied 10 April 2019

Yes Sir, Daily limit of 10,000 not exceeded.

CA. Kasi Reddy Nallappa Reddy (Chartered Accountant) (153 Points)
Replied 10 April 2019

Section 269ST shall not be applicable as the cash payment did not cross two lakhs or more, However, as per section 40A(3) payment or aggregate of payments made to a person in day which is exceeding 10000/- shall not be allowed as deduction.

Section 40A(3) reproduced here:

Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, ⁴⁵[or use of electronic clearing system through a bank account, exceeds ten thousand rupees,] no deduction shall be allowed in respect of such expenditure.

Therefore in the present scenario, amount paid in cash (i.e. 1.90 lakhs) shall not be allowed as expenditure while computing the PGBP income as per Income Tax Act'1961.

Kindly do let us know if any further clarification/information is required.

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RAMAKRISHNAN R (INCOME TAX OFFICER) (1736 Points)
Replied 10 April 2019

Then there's no problem... Neither 40A (3) nor 269ST will attract

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CA. Kasi Reddy Nallappa Reddy (Chartered Accountant) (153 Points)
Replied 10 April 2019

He purchased the goods on daily basis and paid in the form of cash in total amounting to 1.90 lakhs, therefore no penalty or dis allowance. However, please ensure payment made in day to person should not exceed the INR 10000/-.

1 Like